On August 24, 2014, at 3:20 AM, a 6.0 magnitude earthquake occurred just south of Napa, California. Although it was not as strong as the Loma Prieta earthquake that struck nearby San Francisco in 1989, it caused significant damage to a number of homes and businesses in the Napa area. About 200 people were injured, and the U.S. Geological Society estimates that total damage from this quake will approach $1 billion. Unfortunately, since a majority of people do not buy earthquake insurance -- and damage from earthquakes is largely excluded from property insurance policies -- most of the damage will not be covered.
Earlier in the month, a natural disaster also affected residents in Arizona. On August 19th, Phoenix Arizona and surrounding areas were hit by severe thunderstorms. In a matter of a few hours, over five inches of rain fell in an area just north of Phoenix. Normally dry areas were overtaken by rivers of mud and water, which cut off two major freeways and caused damage to many homes, businesses, and vehicles. As with the Napa quake, much of the damage resulting from that event will not be covered by insurance because flooding is also excluded by most property policies.
Coverage for both earthquakes and flooding is available for property owners. In fact, in California, an offer to buy earthquake coverage must be made by the insurance company to a customer whenever a homeowner policy is sold. Flood insurance is also usually required by mortgage companies if the property is located in a flood zone. That coverage can be purchased from the federal government through a licensed insurance agency.
It’s easy to suggest that property owners buy earthquake and/or flood insurance. Both are available and easy to secure. However, the cost of these policies can be expensive and the deductibles can be high. Every property owner needs to consider the value of the coverage relative to the cost of replacing or repairing property should one of these events take place. If it’s likely that your property could suffer a loss from one or both of these perils, electing coverage might be prudent. In some cases, the cost can be included as part of the mortgage payment or it can be spread over a number of payments to make it more affordable.
One last note --although earthquake and flood events highlight the need for special coverage, every property owners should periodically conduct an overview of his or her entire insurance portfolio. Are the limits of coverage enough to rebuild your property? Are your deductibles too low (increasing them could reduce your costs)? Have you added new equipment or vehicles since last year and are they properly insured? Are some vehicles or equipment now outdated and not worth insuring?
Western Growers Insurance Services can assist you with making a thorough analysis of your insurance needs. For more information contact Greg Nelson, assistant vice president of commercial lines.
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